Credit unions’ share of the U.S. mortgage market has grown from 2% in 2006 to 8.57% as of March 2017, fueled by trust gained from consumers during the Great Recession and a boom in refinance volume.
But the game is changing as refinance volume dries up and the market shifts to purchase money mortgages, says Tracy Ashfield, president of Ashfield & Associates, a mortgage consulting firm.
She addressed the CUNA Economics & Investments Conference Tuesday in Las Vegas.
Ashfield cites three dynamics that are affecting credit unions’ real estate lending efforts:
A multifaceted transition
Shifting to purchase money mortgages is a different animal, according to Ashfield.
“Gearing up for this isn’t simple,” she says. “The process is much different.”
Refinancing typically involves working with current members via existing processes with minimal time pressures. But competing for purchase business is all about “people, price, product, and process,” she says.
“We’re not to the point yet where purchase lending is highly automated. It’s still a people business,” Ashfield says. “People want high-touch service; you need to work with members more, and you need to meet members on their terms. In the refinance world, it’s less people-intensive—you’re just waiting for the refinance to go through.”
This business also requires credit unions to think about price and products: Will you keep the servicing? Sell to the secondary market? Keep the loans in house? Be more price-competitive with one or more products? Offer low down payment options?
Purchase business also adds people to the process: Seller, buyer, two real estate agents, and possibly other parties who are buying or selling with contingencies.
“There are so many stakeholders,” Ashfield says, “that if my process falls down, it’s a real problem.”
Plus, compliance issues, Fair Lending Act pressures, and changing investor expectations make the whole process more difficult, she says.
“Regulations have really impeded creativity and innovation,” Ashfield says. “They’ve taken some of the brightest minds in credit unions—innovators and strategic thinkers—and have them reading 10,000 pages of regulations to stay in compliance.”
Strategies for success
Still, mortgage lending is an important and potentially lucrative line of business for credit unions that have the stomach for it. For those that do, Ashfield offers several strategies for success:
“Mortgage lending has been slow to change,” Ashfield adds, “but it’s a new game now.”